The Basics of the Affordable Care Act

By Yigang Xu, CPA
Greenville, SC

What is the Affordable Care Act?
The Patient Protection and Affordable Care Act (PPACA), is a statue signed into law by President Obama on March 23, 2010, commonly known as the Affordable Care Act (ACA). Among many of its regulations and requirements, the primary rule that most American must carry health insurance or face a penalty also known as the “individual mandate” is the most extensive and is just now taking effect.

Who must have health insurance and when?
In general ACA requires most U.S. citizens and legal residents to have minimum essential coverage on themselves and their dependents by  January 1, 2014. But since the law allows a person to be uninsured for less than three months without a penalty, so a person has until March 31, 2014 to get covered,  which requires an enrollment by February 15, 2014.

Because of many recent difficulties with, the website of the federal health insurance exchange, the White House announced that the individual mandate enrollment deadline to be extended to March 31, 2014.  So if a person applies for enrollment by March 31, 2014, the noncompliance penalty will not apply.

There are several exemptions to the mandate:
• Unlawful presence in the United States
• Incarceration
• Short coverage gap (less than three consecutive months)
• Enrolled member of a federally recognized American Indian or Alaskan Native Tribe
• Household income below the minimum threshold for filing tax return
• State did not expand Medicaid and household income is less than 100% of federal poverty level
• Religious conscience and objections
• The cost of minimal essential coverage is greater than 8% of the household income

What is minimum essential coverage?
First and foremost, ACA requires all health plan to offer three essential benefits which have already taken effect by now:
• A person cannot be denied insurance due to some pre-existing conditions
• Premiums cannot vary by gender
• Employer plans that covers dependents must also offer coverage to adult children up to age 26, even the child is no longer a dependent.

Here are list of minimum essential coverage:
• Employer-sponsored coverage (including COBRA coverage and retiree coverage)
• Coverage purchased in the individual market, including a qualified health plan offered by the Health Insurance Marketplace (also known as an Affordable Insurance Exchange)
• Medicare Part A coverage and Medicare Advantage plans

• Most Medicaid coverage
• Children’s Health Insurance Program (CHIP) coverage
• Certain types of veterans health coverage administered by the Veterans Administration
• Coverage provided to Peace Corps volunteers
• Coverage under the Nonappropriated Fund Health Benefit Program
• Refugee Medical Assistance supported by the Administration for Children and Families
• Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these programs may apply to HHS to be recognized as minimum essential coverage)
• State high risk pools for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these program may apply to HHS to be recognized as minimum essential coverage)
 Source: IRS “Questions and Answers on the Individual Shared Responsibility Provision”

What is Health Insurance Marketplace?
Health Insurance Marketplaces, also called Exchanges, are websites that are created by the federal government or states to facilitate individuals to shop for insurance coverage, websites offer comparison of available plan options based on price, benefits and services.
Plans of various levels are offered depends on the percentage of coverage, from 60% Bronze to 90% Platinum.

A penalty will be collected when you file your tax return if you are required to have coverage but don’t (including your children), or if your coverage fails to meet the minimum essential coverage requirement. Penalty is calculated through formulas and depend on your unique situation. Please consult your tax professional to assess whether you are subject to the penalty and how much.

This is a very brief and basic summary of the Affordable Care Act covering some basics and particularly the individual mandate. Please check out the next article covering premium assistance credit and cost sharing assistance.

If you need help assessing your eligibility for the premium credit or whether you may subject to the penalty, please feel free to contact me at 864.558.0620 and

Thanks for reading.

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Disclaimer: The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.